Nordea Bank Lietuva, which belongs to Nordea, the largest financial group in the Nordic and Baltic countries, is starting the distribution of index-linked bond US Real Estate share index "iShares Dow Jones U.S. Real Estate Index Fund". This index reflects the trends in the US real estate market, which is currently not experiencing the best of times. The index-linked bonds offered to investors who expect the real estate market to recover provide the possibility to earn money and together preserve the value of the money that is invested.
"As one of the greatest investment gurus said, the most money is earned not when the market is quiet, but during times of crisis. For venturous investors who feel that cheaper US residential and commercial real estate is a good investment, the investment product offered by us is very handy since in case of failure the capital invested is safeguarded, whereas in case of success the earnings are proportionate to the increment in the index", Modestas Plakys, the investment product project manager of Nordea Bank Lietuva, said.
According to Nordea specialists, the cheap dollar and dropping real estate prices have already attracted quite a few foreign investors to the US real estate market. Due to the US housing crisis, the index prices of real estate company shares plummeted approximately 30 per cent from the peak they had reached at the beginning of 2007. An essential factor causing the trends in the housing market is the direction that the USA economy is taking. It is thought that the US economy will slow down this year or may even experience a decline. Yet, it is probable that with the efforts of the US government and central bank, the US economy will start to recover in the second half of the year.
According to Mr. Plakys, "structured bonds have one especially attractive feature. If the investment index with which the value of the structured bond is linked increases, the value of the structured bonds will naturally increase, yet a change in the exchange rate of the US dollar will be included in addition. At present, the US dollar is at a record low level with respect to the euro. This means that if its value increases, which would be natural if the US economy recovers, the investor's profits would double - from the increment in the index, and from the growth in the value of the dollar. Meanwhile, if events swerved in the pessimistic direction and, let us say, the index did not rise, the fluctuations in the US dollar would not have an effect on the value to be paid out in five years, and the investor would recover a fixed amount in euros".
Index-linked bond US Real Estate will be distributed until 8 May, and the minimum investment amount is only 1000 euros. One can acquire structured bonds at all branches of Nordea bank.
The index-linked bond US Real Estate has two alternatives: Basic and Extra. The term of redemption of the Basic bonds is five years and the subscription price is variable, approximately 100 per cent of the nominal value of the index-linked bond. Upon expiry of the term, the investor will be paid 70 per cent of the index increment value. The redemption term of the Extra alternative is also five years, but the acquisition price stands at approximately 110 per cent of the nominal value. Upon expiry of the term, the investor will be paid 120 per cent of the index increment value. The buyers of both types of index-linked bonds US Real Estate are guaranteed the nominal value of the index-linked bonds even if the index drops during the investment period. The nominal price of index-linked bond is 100 euros, and the minimum investment is 1000 euros. Distribution ends on 8 May.
iShares Dow Jones U.S. Real Estate Index Fund is a capitalisation-weighted index, which comprises shares of US real estate companies. The index measures the share price performance of US real estate companies. The companies include holding and development companies and Real Estate Investment Trusts (REIT). The companies' real estate holdings include residential, commercial and industrial real estate. In March 2008 the index had 81 companies. The index is adjusted quarterly.
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